CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215.
Long Run Incremental Cost Methodology for Dominant Certificated Telecommunications Utility
(DCTU) Services.
(a) Application. This section shall apply to DCTUs with annual revenues from regulated telecommunications
operations in Texas of $100 million or more for five consecutive years. An incumbent local exchange
carrier that is not a Tier 1 local exchange company as of September 1, 1995, at that company's option, may
adopt the cost studies approved by the commission for a Tier 1 local exchange company.
(b) Purpose. This section shall be used to determine the long run incremental costs incurred by DCTUs in the
provision of telecommunications services. The costs determined in this section shall not be used to
determine a company's revenue requirement during a proceeding pursuant the Public Utility Regulatory Act,
Chapter 53, Subchapters C and D or E.
(c) Definitions. The following words and terms when used in this section shall have the following meaning
unless the context clearly indicates otherwise.
(1) Ancillary services — The category of basic network functions (BNFs) (as defined in paragraph (2) of
this subsection) that provide for certain activities that either support or otherwise are adjuncts to other
BNFs or finished services. This category of BNFs consists of three subcategories of BNFs: Billing
and Collection; Measurement; and Operator Services.
(A) Billing and collection — The subcategory of BNFs that provide for the function of compiling
the information needed for customer billing, preparing the customer bill statement, disbursing
the bill and collecting the customer payments.
(B) Measurement — The subcategory of BNFs that provide the functions of assembling, collating
and transmitting end office switch recorded call data (occurrence and duration).
(C) Operator services — The subcategory of BNFs that provide for the provision of a number of live
or mechanized assistance functions to aid customers in the following ways: obtaining customer
telephone number, street address and ZIP code information (directory assistance); providing new
telephone numbers or explanatory information to callers who dial numbers which have been
changed or disconnected (intercepts); providing assistance to customers in completing operator
handled toll or local calls (collect, credit card, third party, station-to-station or person-toperson); checking busy lines to make sure the line is not out of service (busy line verification);
and interrupting busy lines (busy line interruption). These operator services are provided to end
user customers as well as local exchange and interexchange carriers.
(2) Basic network function (BNF) — A discrete network function, which is useful either as a standalone function or in combination with other functions, for which costs can be identified.
(3) Capital costs — The recurring costs that result from expenditures for plant facilities that are
capitalized. The annual capital costs consist of depreciation, cost of money, and income taxes.
(4) Categories of BNFs — All BNFs shall fall into one of four categories of BNFs. The categories are:
network access (as defined in paragraph (13) of this subsection); switching and switch functions (as
defined in paragraph (16) of this subsection); dedicated and switched transport (as defined in
paragraph (10) of this subsection); and ancillary services (as defined in paragraph (1) of this
subsection).
(5) Common costs — Costs that are not directly attributable to individual cost objects. For the purposes
of this section there are three types of common costs: general overhead costs; costs common to BNFs;
and costs common to services.
(A) General overhead costs — Costs incurred in operating and managing the company that are not
directly attributable to BNFs or services.
(B) Costs common to BNFs — Costs incurred in the provision of BNFs that can not be directly
attributed to any one BNF individually but only to a category or subcategory of BNFs
collectively.
§26.215(c)(5) continued
§26.215--1
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(C) Costs common to services — Costs incurred in the provision of two or more services that do not
vary with changes in the relative proportions of the outputs of those services. Common costs are
not directly attributable to any one service individually but only to a group of services
collectively. In the event a BNF is used in the provision of two or more services then the
volume insensitive cost of the BNF is a cost common to the services that use the BNF.
However, if the technological requirements for the provision of one service alter the least cost
technology choice for common BNFs or common facilities, then the increase in costs caused by
the requirements for more advanced technologies is not a common cost but a cost directly
attributable to the service that alters the least cost technology choice.
Cost causation principle — The principle that only those costs that are caused by an activity (such as
a network function, service, or group of services) in the long run are directly attributable to that
activity. Costs are caused by an activity, in the long run, if the costs are brought into existence as a
direct result of the activity.
Cost driver — A specific condition, under which a BNF is provided, whose change causes significant
and systematic changes in the cost of providing a BNF. For example, if the cost of providing a
network access channel varies with the density and size of a wire center, then density and size are cost
drivers for that BNF.
Cost of debt — The rate of interest paid on borrowed money.
Cost of money — The weighted annual cost to the DCTU of the debt and equity capital invested in
the company.
Dedicated and switched transport — The category of BNFs that provide for dedicated or shared
transmission transport between two or more DCTU switching offices or wire centers. This BNF
category consists of two subcategories of BNFs: Dedicated Transport and Switched Transport.
(A) Dedicated transport — The subcategory of BNFs that provide for full period, bandwidth specific
(e.g., DS-0, DS-1, DS-3) interoffice transmission paths between the originating and terminating
points of channel connection.
(B) Switched transport — The subcategory of BNFs that provide for shared interoffice transmission
paths between originating and terminating points of switching.
Group of services — A number of separately tariffed services that share significant common costs
(as defined in paragraph (5) of this subsection) that are necessary and unique to the provision of those
services and are not directly attributable to any one service individually. This term also refers to a
situation in which two or more groups of services are part of a larger group of services because of
significant common costs that are necessary and unique to the provision of all the services in the group
but are not directly attributable to any one group or service individually.
Measure of unit cost — The measure of usage used to calculate unit cost for a particular BNF (for
example, a minute of use of a switching function, or a quarter mile of a DS-1 network access channel).
The measure of unit costs may be multidimensional; for example, it may have both time and distance
components. The measure of unit cost chosen for a BNF shall correspond to the basis upon which the
costs of that BNF are incurred.
Network access — The category of BNFs that accommodate access to other network functions
provided by DCTUs. Access is accomplished by transmission paths between customers and DCTU
wire centers. This category consists of three subcategories of BNFs: network access channel;
network access channel connection; and channel performance and other features and functions.
(A) Network access (NA) channel — The subcategory of BNFs that provide the transmission path
between the point of interface at the customer location and the main distribution frame, or
equivalent (e.g., DSX-1, DSX-3), of a DCTU wire center.
§26.215--2
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215(c)(13) continued
(B) Network access (NA) channel connection — The subcategory of BNFs that provide the interface
between the network access channel and the DCTU wire center switching equipment, subsequent
dedicated transport equipment (dedicated interoffice circuits), or subsequent channel equipment
(dedicated intraoffice circuits).
(C) Channel performance and other features and functions — The subcategory of BNFs that provide
the channel functions associated with transmission or service type (e.g., analog, digital, coin,
ISDN), bandwidth conversion, signaling, multiplexing, amplification, and channel performance.
(14) Significant — For the purposes of this section, the qualifying term significant is used to refer to
instances in which costs or changes affect total study results by at least five percent. This general
guideline for when costs or changes are significant may be relaxed by considering the cumulative
effect of either including or excluding costs or changes from a study.
(15) Subcategories of BNFs — Groupings of closely related BNFs in a category of BNFs.
(16) Switching and switch functions — The category of BNFs that provide for switched access between
two or more network access channels or between network access channels and other BNFs, such as
interoffice transport. This function is accomplished through the establishment of a temporary
transmission path between network access channels in the same switching office; between a network
access channel and the interoffice facilities that interconnect switching offices; or between a network
access channel and other BNFs. This BNF category shall cover the first point of switching for a
customer. This BNF category consists of three subcategories of BNFs: interoffice switching;
intraoffice switching; and switching features.
(A) Interoffice switching — The subcategory of BNFs that provide for: switching between network
access channels and switched transport facilities which are connected to different wire centers;
and switching between network access channels and switched transport facilities when a tandem
switch is used as the first point of interface to the DCTU switched network (e.g., connection of
facilities from an interexchange carrier's point of network interface).
(B) Intraoffice switching — The subcategory of BNFs that provide for switching between two or
more network access channels within the same wire center.
(d) General principles.
(1) Underlying the construction and application of this section is the recognition that the DCTU network
consists of a finite number of BNFs that, when bundled in various combinations, can be used to
deliver and market a vast variety of telecommunications services. Therefore, the determination of the
cost of a service and the costs of a group of services under this section shall involve the identification
and costing of BNFs.
(2) The LRIC studies that the DCTU is required to file under this section shall assume that the company is
operating in the long run and employs least cost technologies, as those terms are defined in subsection
(c) of this section.
(3) In order to obtain accurate LRIC study results, the DCTU shall avoid the use of embedded cost data;
expense items and capital costs shall reflect long run incremental costs and the DCTU shall justify any
instance in which embedded cost data are used. Further, the fact that the costs determined under this
section may differ from the company's embedded costs as determined during proceedings under the
Public Utility Regulatory Act, Chapter 53, Subchapters C and D or E, should in no way cause the
company to attribute any of this cost discrepancy to LRIC studies for BNFs, services, or groups of
services.
(4) When a BNF is used in the provision of two or more services then the volume insensitive cost of the
BNF is a cost common to the services (as defined in subsection (c)(5)(C) of this section) that use the
BNF.
§26.215(d) continued
§26.215--3
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
(5) When services share significant common costs (as defined in subsection (c)(5)(C) of this section),
none of the common costs shall be included in the LRIC studies for the services individually; instead,
the company shall identify which services share the common costs and attribute the cost recovery
responsibility of these costs to the group of services collectively. Specifically, the individual LRIC
studies for residential and business basic local exchange service, as these services are tariffed on the
effective date of this section, shall exclude any volume insensitive costs associated with the use of the
network access channel basic level (as defined in subsection (e)(1)(A) of this section) and network
access channel connection basic level (as defined in subsection (e)(2)(A) of this section).
(6) When two or more groups of services share common costs, none of the common costs shall be
included in the LRIC studies for groups individually; instead, the company shall identify which groups
share the common costs and assign the common cost recovery responsibility of these costs to these
groups collectively.
(7) Nothing in this section is intended to either endorse or reject the DCTU's current rate and tariff
structures.
(e) Identification of basic network functions. The DCTU shall identify for each subcategory of BNFs the
relevant and separately identifiable BNFs. The determination of the appropriate degree of aggregation of
network components, functions, or activities into separately identifiable BNFs shall be consistent with the
principles described in subsection (d) of this section. Furthermore, in choosing BNFs, the DCTU shall seek
to minimize the number of network components, functions, or activities that are not included in BNFs. In
addition to BNFs the company identifies under this subsection, the company shall identify for each
subcategory of BNFs the following prescribed BNFs:
(1) Required BNFs for subcategory network access (NA) channel:
(A) NA channel basic level: A transmission path which provides less than 1.544 MBPS digital
capability. This includes 300 to 3,000 Hz analog voice service.
(B) NA channel DS-1 level: A transmission path which has 1.544 MBPS digital capability.
(C) NA channel DS-3 level: A transmission path which has 45 MBPS digital capability.
(2) Required BNFs for subcategory NA Channel Connection:
(A) NA channel connection basic level: An interface for channels which provide less than 1.544
MBPS digital capability. This includes the interface for 300 - 3,000 Hz analog voice service
which is the basic interface for most voice grade services such as: basic local residential and
local business service, PBX trunks, centrex-type access lines and voice grade dedicated transport
service. In addition, this category includes the interface for four frequency bandwidths provided
for audio channels such as: 200 to 3,500 Hz, 100 to 5,000 Hz, 50 to 8,000 Hz and 50 to 15,000
Hz. Also included in this BNF are the interfaces for low speed data transmission at speeds of
2.4, 4.8, 9.6, 56 KBPS and all other speeds below the T-1 rate of 1.544 MBPS. This interface is
for narrowband service.
(B) NA channel connection DS-1 level: An interface for 1.544 MBPS digital transmission channels.
This interface connects high capacity wideband transmission channels which operate in a full
duplex, time division (digital) multiplexing mode.
(C) NA channel connection DS-3 level: An interface for 45 MBPS digital transmission channels.
This interface connects broadband transmission channels which operate in full duplex, time
division (digital) multiplexing mode.
§26.215--4
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215(e) continued
(3) Required BNFs for subcategory Channel Performance and Other Features and Functions:
(A) Standard signaling and transmission level capabilities. Signaling and transmission level
capabilities suitable for a wide variety of network services and applications associated with the
BNF NA channel basic level, as defined in paragraph (1)(A) of this subsection.
(B) Nonstandard signaling and transmission level capabilities and other features. Signaling and
transmission level capabilities and other features and functions, other than those defined in
subparagraph (A) of this paragraph, such as high voltage protection, multiplexing, and bridging.
The company is encouraged to disaggregate this BNF into smaller BNFs that capture the variety
of features and functions available to customers.
(4) Required BNFs for subcategory interoffice switching: interoffice switching. The type of
switching that provides for: switching between network access channels and switched transport
facilities which are connected to different wire centers; and switching between network access
channels and switched transport facilities when a tandem switch is used as the first point of interface
to the switched network (e.g., connection of facilities from an interexchange carrier's point of network
interface).
(5) Required BNFs for subcategory intraoffice switching: intraoffice switching. Switching between
two or more network access channels served from the same wire center.
(6) Required BNFs for subcategory switching features:
(A) Hunting arrangements. An optional function available to customers with multiple local
exchange access lines in service.
(B) Custom calling features. Various optional features which provide added calling convenience.
(C) Central office automatic call distribution. The provision of call distribution as an integrated
function of certain electronic central offices equipped to provide this capability. This function
permits an equal distribution of a large volume of incoming calls to predesignated groups of
answering positions, referred to as agent positions.
(D) Central office based PBX-type functions. A business communications system furnished from
stored program control central offices that provides the equivalent of customer premises PBX
services through the use of central office hardware and software as well as through network
access facilities from the central office to the customer premises. Included in this BNF shall be
only hardware specific to this type of service, processor or memory usage involved in special
features for this type of service, and any software or software right to use fees associated with
this type of service. This BNF should exclude any network functions that are already identified
as other BNFs.
(7) Required BNFs for subcategory dedicated transport:
(A) Dedicated transport termination. An interface which provides for the transmission conversions
(e.g., multiplexing) required between channel connection and dedicated transport facilities.
(B) Dedicated transport facility. The full period, bandwidth specific (e.g., DS-0, DS-1, and DS-3),
interoffice transmission paths established between two points of dedicated transport termination.
(8) Required BNFs for subcategory switched transport:
(A) Switched transport termination. An interface which provides for the transmission conversion
(e.g., multiplexing) required between the switching function and switched transport facilities.
(B) Switched transport facility. The temporary interoffice transmission paths established between
two points of switched transport termination.
(C) Switched transport tandem switching. The intermediate points of switching used as an economic
surrogate to direct routing of interoffice facilities in the provision of switched transport.
§26.215--5
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215(e) continued
(9) Required BNFs for subcategory billing and collection: billing and collection. The function of
compiling the information needed for customer billing, preparing the customer bill statement,
disbursing the bill and collecting the customer payments (this includes any collection activities
required for late payment or non-payment of billing amount due).
(10) Required BNFs for subcategory measurement: measurement. The function of assembling,
collating and transmitting end office switch recorded call data (occurrence and duration).
(11) Required BNFs for subcategory operator services: operator services. The role of providing a
number of live or mechanized assistance functions to aid customers in the following ways: obtaining
customer telephone number, street address and ZIP code information (directory assistance); providing
new telephone numbers or explanatory information to callers who dial numbers which have been
changed or disconnected (intercepts); providing assistance to customers in completing operator
handled toll or local calls (collect, credit card, third party, station-to-station or person-to-person);
checking busy lines to make sure the line is not out of service (busy line verification); and
interrupting busy lines (busy line interruption). These operator services are provided to end user
customers as well as local exchange and interexchange carriers.
(f) LRIC studies for individual BNFs. The DCTU shall perform a LRIC study for each of the BNFs
identified under subsection (e) of this section. The company shall perform the LRIC studies consistent with
the principles described in subsection (d) of this section. Additionally, the company shall use the following
instructions in determining the LRIC for individual BNFs.
(1) Relevant increment of output. For the purposes of this subsection, the relevant increment of output,
as that term is used in the definition of LRIC in §26.5 of this title (relating to Definitions), shall be the
level of output necessary to satisfy total current demand levels for all services using the BNF in
question. Adjustments to total service output may be made to reflect the presence of new services for
which demand levels can demonstrably be anticipated to increase significantly over the course of six
months.
(2) Relating expenses to BNFs. The company shall avoid the use of embedded cost data and shall
determine expenses consistent with the principles of long run incremental costing.
(A) Common expenses. Common expenses that are not directly attributable, using the cost causation
principle, to the BNF shall be excluded.
(B) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified.
(C) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be
excluded from the LRIC study for individual BNFs. Specifically, taxes associated with the
provision of services that use more than one BNF shall not be included in the BNF LRICs.
(3) Least cost technology. LRIC studies shall assume the use of least cost technology. The choice of
least cost technologies, however, shall:
(A) be restricted to technologies that are currently available on the market and for which vendor
prices can be obtained;
(B) be consistent with the level of output necessary to satisfy current demand levels for all services
using the BNF in question; and
(C) be consistent with overall network design and topology requirements.
(4) Network topology. LRIC studies shall use the existing or planned network topology.
(5) Cost of money. When the company uses the most recent commission approved rate of return for the
company, determined either in a rate proceeding as described in §26.201(d)(1) of this title (relating to
Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its
reasonableness. The company may use any other forward-looking rate, but shall justify its use. The
DCTU is not required to update its filing only to reflect the most recently approved cost of money.
§26.215(f) continued
§26.215--6
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
(6) Rate of depreciation. When the company uses the most recent commission approved rate of
depreciation for the company there will be a presumption of reasonableness. The company shall
justify the use of any other rate.
(7) Measure of unit cost. LRIC studies shall identify the appropriate measure of unit cost for a BNF
(e.g., minutes of use, access line). The measure of unit cost chosen for a BNF shall correspond to the
basis upon which the costs of the BNF are incurred. The measure of unit cost may be
multidimensional; for example, it may have both time and distance components. In identifying the
appropriate measure of unit cost, the company shall ignore the current rate structure for tariffed
services using the BNF.
(8) Determination of unit cost. Using the measure of unit cost identified under paragraph (7) of this
subsection, the company shall calculate unit cost for the BNF based on the assumption of full capacity
utilization of the BNF, which should allow for any spare capacity due to lumpy investments or
technical requirements, such as spare capacity needed for testing. The unit cost shall be calculated
based on the volume sensitive costs of the BNF and exclude all costs that are volume insensitive (as
those terms are defined in §26.5 of this title).
(9) Determination of volume insensitive costs. The company shall calculate the volume insensitive
costs (as defined in §26.5 of this title) for the BNF.
(10) Cost drivers. LRIC studies shall identify and account for all relevant cost drivers. LRIC studies for
certain BNFs shall at a minimum account for the cost drivers specified below.
(A) Cost drivers for NA channel basic level, NA channel DS-1 level, and NA channel DS-3 level.
The LRICs for these BNFs shall systematically account for variations in costs caused by
variations in:
(i)
the density of a wire center;
(ii)
the size of a wire center; and
(iii)
the distance.
(B) Cost drivers for NA connection basic level, NA connection DS-1 level, and NA connection DS3 level. The LRICs for these BNFs shall systematically account for variations in costs caused
by variations in:
(i)
the density of a wire center; and
(ii)
the size of a wire center.
(C) Cost drivers for intraoffice switching and interoffice switching. The LRICs for these BNFs shall
systematically account for variations in costs caused by variations in:
(i)
the density of a wire center;
(ii)
the size of a wire center; and
(iii)
the time of day.
(D) Cost drivers for dedicated transport facilities and termination. The LRICs for these BNFs shall
systematically account for variations in costs caused by variations in:
(i)
the size of a wire center; and
(ii)
the distance.
(E) Cost drivers for switched transport facilities, termination and tandem switching. The LRICs for
these BNFs shall systematically account for variations in costs caused by variations in:
(i)
the size of a wire center;
(ii)
the distance; and
(iii)
time of day.
§26.215--7
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215(f)(10) continued
(F) Cost drivers for measurement. The LRIC for this BNF shall systematically account for
variations in costs caused by variations in:
(i)
the density of a wire center;
(ii)
the size of a wire center;
(iii)
the time of day; and
(iv)
the duration of a call.
(G) Cost drivers for operator services. The LRIC for this BNF shall systematically account for
variations in costs caused by variations in the type of operator services calls.
(g) LRIC studies for tariffed services. The DCTU shall perform a LRIC study for each tariffed service,
except those services for which a waiver has been granted under the workplan approved by the commission.
Each LRIC study for a tariffed service shall be calculated as the sum of the costs caused by that service's
use of BNFs and any other service specific costs associated with functions not identified as separate BNFs,
such as expenses of billing, service specific advertising and marketing, and service specific taxes. Each
LRIC study for a tariffed service shall be consistent with the principles described in subsection (d) of this
section. Additionally, the company shall use the following instructions in determining the LRIC for
individual tariffed services:
(1) Mapping of BNFs and costs to tariffed services. The LRIC study shall identify the BNFs that are
used in the provision of the tariffed service; the long run incremental costs for the tariffed service shall
include the costs associated with this usage. The costs associated with the service's use of a BNF shall
be calculated as the product of the unit cost for the BNF (as determined under subsection (f)(8) of this
section) and the demand of the service for that BNF.
(2) Identification of other costs. The LRIC study for an individual tariffed service shall include all
service specific costs (e.g., expenses of billing, marketing, customer service or service specific taxes)
related to the provision of the service that are not included in the costs for the BNFs.
(3) Exclusion of common costs. The LRIC study for an individual tariffed service shall exclude any
costs that are common costs (as defined in subsection (c)(5) of this section). Specifically, the
individual LRIC studies for residential and business basic local exchange service, as these services are
tariffed on the effective date of this section, shall exclude any volume insensitive costs associated with
the use of the network access channel basic level (as defined in subsection (e)(1)(A) of this section)
and network access channel connection basic level (as defined in subsection (e)(2)(A) of this section).
(4) Relevant increment of output. For the purposes of this subsection, the relevant increment of output,
as that term is used in the definition of LRIC in §26.5 of this title (relating to Definitions), shall be the
level of output necessary to satisfy current demand levels for the service. Adjustments to total service
output may be made to reflect the presence of new services for which demand levels can demonstrably
be anticipated to increase significantly over the course of six months.
(5) Relating expenses to services. The company shall avoid the use of embedded cost data and shall
determine expenses consistent with the principles of long run incremental costing.
(A) Common expenses. Common expenses that are not directly attributable, using the cost causation
principle, to the service shall be excluded.
(B) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified.
(C) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be
excluded from the LRIC study for individual services.
(6) Least cost technology. LRIC studies shall assume the use of least cost technology. The choice of
least cost technologies, however, shall:
(A) be restricted to technologies that are currently available on the market and for which vendor
prices can be obtained;
§26.215(g)(6) continued
§26.215--8
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
(B) be consistent with the level of output necessary to satisfy current demand levels for all services
using the BNF in question; and
(C) be consistent with overall network design and topology requirements.
(7) Network topology. LRIC studies shall use the existing or planned network topology.
(8) Cost of money. When the company uses the most recent commission approved rate of return for the
company, determined either in a rate proceeding as described in §26.201(d)(1) of this title (relating to
Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its
reasonableness. The company may use any other forward-looking rate, but shall justify its use. The
DCTU is not required to update its filing only to reflect the most recently approved cost of money.
(9) Rate of depreciation. When the company uses the most recent commission approved rate of
depreciation for the company there will be a presumption of reasonableness. The company shall
justify the use of any other rate.
(h) Identification of BNFs and groups of services that share significant common costs and calculation of
such common costs. The company shall identify all instances in which BNFs and groups of services share
significant common costs and calculate such common costs.
(1) Costs common to BNFs. The company shall identify and calculate for each subcategory of BNFs and
category of BNFs significant costs that are common to BNFs (as defined in subsection (c)(5)(B) of
this section). Costs common to BNFs shall only be identified and calculated at the level of
subcategories of BNFs and/or categories of BNFs.
(2) Costs common to groups of services. The company shall identify and calculate all significant
common costs and the groups of services that share those common costs (as defined in subsection
(c)(5)(C) of this section). The calculation of common costs required under paragraphs (1)-(2) of this
subsection shall be consistent with the principles described in subsection (d) of this section and the
instructions listed below.
(3) Relevant increment of output. When common costs are computed for BNFs or services, the
relevant increment of output, as that term is used in the definition of LRIC in §26.5 of this title
(relating to Definitions), shall be the level of output necessary to satisfy current demand levels for the
BNFs or the services. Adjustments to total service output may be made to reflect the presence of new
services for which demand levels can demonstrably be anticipated to increase significantly over the
course of six months.
(4) Expenses. The company shall avoid the use of embedded cost data and shall determine expenses
consistent with the principles of long run incremental costing.
(A) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified.
(B) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be
excluded from the cost studies for common costs.
(5) Least cost technology. The studies shall assume the use of least cost technology. The choice of least
cost technologies, however, shall:
(A) be restricted to technologies that are currently available on the market and for which vendor
prices can be obtained;
(B) be consistent with the level of output necessary to satisfy current demand levels for the BNFs or
services in question; and
(C) be consistent with overall network design and topology requirements.
(6) Network topology. Cost studies shall use the existing or planned network topology.
§26.215--9
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215(h) continued
(7) Cost of money. When the company uses the most recent commission approved rate of return for the
company, determined either in a rate proceeding as described in §26.201(d)(1) of this title (relating to
Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its
reasonableness. The company may use any other forward-looking rate, but shall justify its use. The
DCTU is not required to update its filing only to reflect the most recently approved cost of money.
(8) Rate of depreciation. When the company uses the most recent commission approved rate of
depreciation for the company there will be a presumption of reasonableness. The company shall
justify the use of any other rate.
(i)
LRIC studies for groups of tariffed services that share significant common costs. The DCTU shall
perform a LRIC study for each group of services identified under subsection (h)(2) of this section. Each
group LRIC shall be calculated as the sum of the LRICs (as determined under subsection (g) of this section)
for the services in the group and the common costs for those services (as identified under subsection (h)(2)
of this section). Each LRIC study shall be consistent with the principles described in subsection (d) of this
section. Additionally, the company shall use the following instructions in determining the LRIC for groups
of services.
(1) Relevant increment of output. When the LRIC is computed for a group of services, the relevant
increment of output, as that term is used in the definition of LRIC in §26.5 of this title (relating to
Definitions), shall be the level of output necessary to satisfy current demand levels for the services in
the group. Adjustments to total service output may be made to reflect the presence of new services for
which demand levels can demonstrably be anticipated to increase significantly over the course of six
months.
(2) Relating expenses to groups of services. The company shall avoid the use of embedded cost data
and shall determine expenses consistent with the principles of long run incremental costing.
(A) Common expenses. Common expenses that are not directly attributable, using the cost causation
principle, to the group of services shall be excluded.
(B) Nonrecurring expenses. The expenses of nonrecurring activities shall be separately identified.
(C) Taxes. Any tax expenses not directly attributable, using the cost causation principle, shall be
excluded from the LRIC study for the group of services.
(3) Least cost technology. LRIC studies shall assume the use of least cost technology. The choice of
least cost technologies, however, shall:
(A) be restricted to technologies that are currently available on the market and for which vendor
prices can be obtained;
(B) be consistent with the level of output necessary to satisfy current demand levels for all services
using the BNF in question; and
(C) be consistent with overall network design and topology requirements.
(4) Network topology. LRIC studies shall use the existing or planned network topology.
(5) Cost of money. When the company uses the most recent commission approved rate of return for the
company, determined either in a rate proceeding as described in §26.201(d)(1) of this title (relating to
Cost of Service) or a commission arbitration proceeding, there will be a rebuttable presumption of its
reasonableness. The company may use any other forward-looking rate, but shall justify its use. The
DCTU is not required to update its filing only to reflect the most recently approved cost of money.
(6) Rate of depreciation. When the company uses the most recent commission approved rate of
depreciation for the company there will be a presumption of reasonableness. The company shall
justify the use of any other rate.
(j)
Requirements for subsequent filings of LRIC studies. The LRIC studies required by this subsection
shall be consistent with the principles, instructions and requirements set forth in this section and the
§26.215--10
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
workplan approved by the commission and shall be reviewed in accordance with the procedures established
in subsection (k) of this section.
(1) Updated studies. A DCTU may be required to update the filings required by this section, other than
the workplan, for those studies where significant changes have occurred.
(2) Provisions for new BNFs. When significant technological or other changes occur that necessitate a
change in the definition of current BNFs or the identification of new BNFs, the DCTU shall file with
the commission and the Office of Public Utility Counsel (OPUC) updated versions for all affected
LRIC studies or new studies as appropriate.
(3) Provisions for new services. For each application for a service filed pursuant to this title, the DCTU
shall file with the commission and OPUC a LRIC study for the service consistent with the principles
described in subsection (d) of this section and the specific requirements set forth in subsection (g) of
this section.
(4) Unbundling of existing tariffed services. When an application filed pursuant to this title proposes a
service that previously had been bundled with other BNFs into a tariffed service, the DCTU shall
carefully reexamine the identification of groups of services that share significant common costs (as
required under subsection (h) of this section). If the new service significantly changes the
identification of groups of services and the identification of common costs, the DCTU should update
all studies required under this section that are affected by these changes.
(k) Review process for LRIC studies. A LRIC study considered under this section shall be reviewed
administratively to determine whether the DCTU's LRIC study is consistent with the principles, instructions
and requirements set forth in this section.
(1) Sufficiency. The LRIC study shall be examined for sufficiency. To be sufficient, the LRIC study
shall conform to the prototype studies developed under the workplan approved by the commission. If
the presiding officer or the commission staff concludes that material deficiencies exist in the LRIC
study, the DCTU shall be notified within 15 days of the filing date of the specific deficiency in its
LRIC study. The DCTU shall have 15 days from the date it is notified of the deficiency to file a
corrected LRIC study.
(2) Time schedule.
(A) No later than 45 days after the filing date of the sufficient LRIC study, any party that
demonstrates a justiciable interest may file with the presiding officer written comments or
recommendations concerning the LRIC study.
(B) No later than 55 days after the filing date of the sufficient LRIC study, OPUC may file with the
presiding officer written comments or recommendations concerning the LRIC study.
(C) No later than 65 days after the filing date of the sufficient LRIC study, the commission staff shall
file with the presiding officer written comments or recommendations concerning the LRIC study.
(D) No later than 75 days after the filing date of the sufficient LRIC study, any party that
demonstrates a justiciable interest, OPUC, or the DCTU may file with the presiding officer a
written response to the commission staff's recommendation.
(E) No later than 85 days after the filing date of the sufficient LRIC study, the presiding officer shall
complete an administrative review to determine whether the DCTU's LRIC study is consistent
with the principles, instructions and requirements set forth in this section. The presiding officer
shall approve the LRIC study or order the DCTU to refile the LRIC study incorporating all
modifications recommended by the presiding officer.
§26.215--11
effective date 12/21/99
CHAPTER 26.
SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS
SERVICE PROVIDERS.
Subchapter J.
COSTS, RATES AND TARIFFS.
§26.215(k)(2) continued
(F) Any party may appeal to the commission an administrative determination by a presiding officer
within five days after the date of notification of the determination. The commission shall rule on
the appeal within 30 days after the date it receives the appeal. If the commission or a presiding
officer orders a cost study to be changed, the dominant certificated telecommunications utility
shall be ordered to make those changes within a period that is commensurate with the
complexity of the LRIC study.
(3) Requests for information. While the LRIC study is being administratively reviewed, the commission
staff, OPUC, and any party that demonstrates a justiciable interest may submit requests for
information to the DCTU. Three copies of all answers to such requests for information shall be
provided within ten days after receipt of the request by the DCTU to the commission staff, OPUC and
any party that demonstrates a justiciable interest.
(4) Suspension. At any point within the first 45 days of the review process, the presiding officer, the
commission staff, OPUC, the DCTU, or any party that demonstrates a justiciable interest may request
that the review process be suspended for 30 days. The presiding officer may grant a request for
suspension only if he or she has determined that the party has demonstrated that good cause exists for
such suspension.
(5) Effective date of the LRIC study. The effective date of the LRIC study shall be the date it is
approved by the presiding officer.
(l)
Notice requirements. At least ten days before a DCTU files any workplan or LRIC study pursuant to this
section, the DCTU shall file with the commission and OPUC a notice of its intent to file such workplan or
LRIC study and the expected filing date. The DCTU's notice shall indicate that the filing is being made
pursuant to this section. The commission shall then publish notice of the DCTU's intent to file the workplan
or LRIC study in the Texas Register.
§26.215--12
effective date 12/21/99